MontaVista Eyes Bigger Networking, Carrier Linux Wins

Linux player MontaVista Software is now officially part of chip vendor Cavium Networks (NASDAQ: CAVM), concluding a rapid $50 million transaction that it hopes will see it better able to go after large networking and carrier customers.

MontaVista is best known for its MontaVista Linux embedded platform,
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in a variety of industries including carrier-grade equipment, networking vendors, and consumer
electronics. Prominent customers include Cisco, Alcatel-Lucent and Motorola.

The latest version of its software, MontaVista Carrier Grade Edition 5.1
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debuted earlier this year with new next-generation Long-Term Evolution (LTE) wireless and networking capabilities. MontaVista CGE is built to comply with the Carrier-Grade Linux specification, a specific grade of Linux designed to meet the needs of service providers.

With the new Cavium ownership, MontaVista will gain a financial backer that executives hope will lead to more customer wins for its flagship offering.

"One of the issues we've had is that some of our bigger customers are now deploying MontaVista Carrier Grade Edition in networks that will be around for the next 10 years, so there was a concern about what is our long-term financial stability and viability," Dan Cauchy, MontaVista's vice president of marketing, told InternetNews.com. "We were fine as a company, but what will happen to a startup five years from now was a lingering question."

Cauchy said that being part of a successful public company like Cavium now provides MontaVista with answers to customers' questions about its stability, and added that some of MontaVista's bigger customers have upgraded MontaVista to a preferred vendor status, due in part to its ownership.

The new ownership also puts MontaVista in a similar situation as its chief embedded rival Wind River, which was acquired by chipmaking giant Intel for $884 million earlier this year.

Still, while it's now owned by a chip vendor, Cauchy noted that Cavium is allowing MontaVista to remain a separate operating entity with its own development team and management, and that its MontaVista Linux platforms will continue to support multiple chip architectures.

Cavium is a licensee for both the MIPS and ARM processor architectures. As a result, Cauchy said he believes that Cavium itself is more processor-neutral than rival Intel (NASDAQ: INTC), which is reliant on the x86 architecture.

"It makes it very attractive for [MontaVista] to continue to support ARM, MIPS, PowerPC and x86," Cauchy said.

In terms of why Cavium was interested in MontaVista, Cauchy noted that software has become a key component for chip vendors.

"Cavium saw that RTOSes(real-time operating systems) are being replaced by Linux," Cauchy said. "In fact in every deal that they would win there was a Linux requirement."

Cauchy added that in the device marketplace, the processor decision is made several months ahead of a software decision. That means that when Cavium wins processor customers, there is an opportunity for an integrated software sale. And for opportunities where Cavium loses a bid for a potential customer's processor business, it still has the opportunity to monetize the customer later in a separate bid with MontaVista's software.

"It's really a one-two approach to try and win both hardware and software," Cauchy said.

Overall, Cauchy does not expect any big changes or challenges at MontaVista as it becomes part of Cavium -- for instance, because MontaVista is expected to remain a separate division, there is little integration that needs to take place. Meanwhile, the company expects to reap other benefits from hooking up with Cavium.

"We're backed by a big player and we can now invest in new stuff," Cauchy said. "We'll invest in more multi-core technologies, virtualization and things like that over the next year."